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General Retirement System board urges support for Detroit bankruptcy plan

In another slow step toward consensus, Detroit’s largest single creditor is backing the latest version of the city’s plan to restructure more than $18 billion of debt in bankruptcy court.

The board of the General Retirement System is urging members to vote their support in creditor ballots due back by July 11.

The board of the retirement system, which provides benefits to most of Detroit’s more 21,000-plus retired city employees, on Wednesday passed a resolution recommending that retirees accept the city’s fourth amended plan of adjustment, introduced in May before U.S. Bankruptcy Judge Steven Rhodes.

The pension plan board expects to issue a letter to nonuniform retirees next week, with its reasons for supporting the plan. Detroit claimed more than 100,000 creditors in 17 classes in filing Chapter 9 bankruptcy last July, but the general system emerged as its largest single creditor, with a claim of just over $2 billion in pleadings.

“The GRS board took action for favorable support of the (plan) after careful review and consideration of reports and recommendations from its restructuring/bankruptcy team of attorneys and financial advisers,” the general system said in a statement today.

The Retired Detroit Police and Fire Fighters Association, whose 6,500 members include more than 80 percent of police and fire pensioners in the separate Police and Fire Retirement System, reached a separate agreement in mediation with the city in April. But that agreement calls for no benefits cuts to police and fire pensioners, who are not eligible for Social Security benefits in retirement, while the general system deal calls for a 4.5 percent reduction in monthly benefits and forgoes cost of living allowances.

“(The current) Plan of Adjustment (the ‘POA’) represents the best interests of Retirement System members and beneficiaries and further represents the best and most prudent option for maximizing the preservation of retirement benefits for the plan members and beneficiaries,” the board resolution states.

Representatives of retirees and current city employees have said they would drop a legal challenge to the city’s bankruptcy case at the 6th Circuit U.S. Court of Appeals — if the state and private foundations committed a contribution to shore up the two city pension plans.

The House passed a series of bills committing $194.7 million to the pensions in May, and the Senate passed the same measure June 3.

The total pot of money for the “grand bargain” is at $819.5 million, but another $56 million in income stabilization funds to ensure pensioners don’t fall below the poverty line is expected to be added, Chief U.S. District Judge Gerald Rosen, who serves as the lead mediator between Detroit and its creditors, told a crowd gathered at the Detroit Institute of Arts on Monday for an announcement of automaker grants.

Those included $26 million total in grants from Ford Motor Co. Fund, General Motors Co./GM Foundation and Chrysler Group LLC.

DIA Chairman Eugene Gargaro said Monday that the DIA has tentative commitments for about 70 percent of its $100 million pledge to the “grand bargain.” The “grand bargain” would shore up Detroit pension funds and spin off the museum from the city to protect its artwork.